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A complete overhaul of property tax has moved significantly closer after a dramatic intervention by the Minister for Housing, who says bills should no longer be solely based on the value of homes and the annual charge needs reform.

Minister Eoghan Murphy said the current property tax system is unfair on homeowners and needs to be significantly changed in the coming months.

“I would like to see a more fundamental change to how the local property tax is calculated, to one that isn’t linked exclusively to the perceived market value of a home,” he told the Sunday Independent.

At the same time, Minister for Transport Shane Ross also weighed into the debate by calling for waivers to be introduced for older people who live in expensive homes but could have a fixed source of income and may be “pension poor”.

Property tax will move centre stage this week, when Mr Murphy holds his first meeting with Minister for Finance Paschal Donohoe to review the controversial charge, which is seen as deeply unfair on Dublin homeowners.

Property tax bills are four times higher in parts of Dublin than in more rural parts of the country.

One in every three euro in property tax raised last year was paid to the four Dublin local authorities.

It is understood one of the new models being actively considered is the introduction of a nationwide property tax “banding” system, whereby factors such as location and local authority services would be taken into account when calculating how much homeowners should pay, rather than just the market price of property in the area.
Mr Murphy said he “would not make any assumptions” about property tax and insisted a number of proposals will be considered before a final decision is reached.

“I think solely having a tax that is linked to a perceived market value of a home isn’t going to be fair on the homeowner in terms of their ability to pay, but neither will it necessarily meet the needs of the local authority in terms of its funding.

“So we are looking at new ways of potentially funding the local authorities using the property tax,” the minister said.

Mr Ross is understood to have sought property tax waivers for pensioners in last year’s budget negotiations but his proposal was shot down by Minister Donohoe.

However, waivers are expected to be considered as part of the forthcoming review.

The Minister for Transport told the Sunday Independent he considered the property tax a form of “double taxation” as in most cases homeowners had already paid stamp duty on their property.

“I think it is a tax which is very unfair in its implementation and very unfair to people living in Dublin,” Minister Ross told the Sunday Independent.

This coming Wednesday is the deadline for homeowners to notify the Revenue Commissioner of their intention to pay the charge by credit card, debit card or cheque.

This is the last year of property tax payments before the freeze on rates expires in 2019.

Mr Murphy and Mr Donohoe’s meeting this week will focus on establishing a cross-departmental review group, whose task will be reform of the property tax system.

TDs and senators, along with interest groups, will be invited to make submissions ahead of the final report.

A senior Fianna Fail source said the party would use its influence to prevent “massive increases” in property tax bills and seek to ensure charges are “as near as possible” to the current rates.

The source said property tax will be a “big issue” for the local elections in 2019, once the freeze on charges has expired.

“The main principle of property taxes – to allow for reinvestment into local services – is our policy, so once the tax is not exorbitant there will be room to manoeuvre,” the source added.

There is great concern among homeowners whose properties have rocketed in value since the crash, who will face massive property tax bills once the freeze ends in 2019.

The Government is also anxious to break the link between property tax and house prices – not least because of concerns that if the property market crashed again, the revenue raised by the tax would plummet.

The property tax review is also set to spark another rural-vs-urban debate, as the vast majority of the €477m raised by the charge is received from Dublin householders.

Revenue Commission figures released last week show a third of the entire property tax raised last year was paid to the four Dublin local authorities. Homeowners in Dun Laoghaire-Rathdown pay an average of €524, while the average in Donegal was €160 and in Leitrim only €130.

Government sources said the current system is unfair because it means the owner of a small apartment in Dublin will pay significantly more property tax than the owner of a large house in rural Ireland.

The current property tax system also sees revenue raised by Dublin local authorities redistributed to rural councils in which less money is raised.